Most people know that to qualify for a mortgage to buy a house a borrower will need to prove their monthly income. This concept isn’t necessarily as straight forward if you are paid on commission or are self employed. Luckily most Mortgage Loan Officers are also paid on commission making them familiar with the process, and equipped to help you.
Here is what you need to know about getting a mortgage when you are commission based or self-employed
- Only “verifiable” income can be used to qualify for a mortgage
- Different mortgage programs have varying rules when it comes to handling commission income
- Commission income CAN be used to qualify if it meets certain criteria
- For Government (FHA, VA, USDA) & Conventional Loans borrowers must have 2 years of commission income and income will be averaged for the last 2 years
- To document this borrowers must provide signed copies of tax returns for 2 years as well as their most recent pay stub
- Borrowers whose incomes reflect a significant decrease from one year to the next must show compensating factors to demonstrate why that decrease took place
- Future & predicted income can NOT be used to qualify for a mortgage.
- What about write offs? The income that mortgage companies use, is your adjusted gross income (AGI) which takes your tax write offs into effect. This means that if you earned $100,000 but only claimed $30,000 after write offs and exemptions you can only qualify based on the $30k.
- Verification of Employment – Whether all or a part of your salary is commission based your mortgage company will always call your company (or a 3rd party service) to verify your employment.
Overall if you have two years of pay history and the amount of income you showed to the government on your taxes is satisfactory to qualify for the loan amount you are looking for, we may be able to help. We work with many Realtors, insurance agents & other sales people and look forward to working with you as well.